Argentina's peso sinks 40% on float day

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The Argentine peso plunged by about 40 per cent yesterday after the government allowed it to float for the first time since announcing its devaluation.

The currency was changing hands in the streets of the capital Buenos Aires for as little as 1.7 pesos to the US dollar.

Analysts say the peso could drop as much as 70 per cent lower in the coming months as Latin America's third-largest economy spins further out of control.

President Eduardo Duhalde, the fifth head of state in three weeks, announced last Sunday he would abandon the country's one-to-one peg with the dollar. As a replacement, Mr Duhalde ordered a fixed rate of 1.4 pesos to the dollar for international trade and banking transactions, but allowed the peso to float freely for domestic deals.

Banks were allowed to trade currency and perform most other transactions yesterday for the first time in three weeks. The stock exchange remained closed, and all loan payments due yesterday were postponed until Monday.

Earlier, rioters overturned cars, lit fires in the streets and threw stones at police, who responded with tear gas and rubber bullets. The protest marked the biggest anti-government rallies since Mr Duhalde took office on 1 January.

Some 10,000 people, exasperated by years of recession and mismanagement of the economy, protested in front of the Casa Rosada presidential palace after midnight.

Residents of poor and wealthy districts of the capital alike also expressed disgust at the government, banging pots and pans on their balconies.

The government has taken several steps to try to protect the peso. Bank current accounts above $10,000 and savings accounts above $3,000 must be turned into fixed-term deposits ­ which will be untouchable for at least a year.

It has converted bank loans of less than $100,000 to pesos on mortgage and small to medium business credits.